Amanuel v Alexandros Shipping Co

Judgment (ex tempore) 1HIS HONOUR: On 23 July 2012 the plaintiff/liquidator of Mustang Marine Australia Services Pty Ltd instituted proceedings against six defendants. The second defendant Russell Watkins, the third defendant Martin Sheridan Lodge, the fourth defendant Philip Handley Armstrong and the fifth defendant Christopher Heaton were each directors of Mustang for various periods during 2008 and/or 2009. As against them, the plaintiff liquidator alleges that in breach of their obligation not to permit the company to trade while insolvent, they failed to prevent the company from incurring debts while it was insolvent, and seeks to recover from them as a debt the amount of debts so incurred pursuant to (Cth) Corporations Act 2001, s 588G. The sixth defendant Standard Bank PLC is sued only for an order subordinating its entitlement as a creditor of Mustang to any amounts recovered from the other defendant s under Corporations Act, s 588Y. The first defendant Standard Bank Asia Limited is sued under s 588G on the footing that it was a "shadow director" of Mustang. 2The first defendant is a Hong Kong corporation and the proceedings were served on it at its registered office in Hong Kong on 10 September 2012. The originating process bore a note: It is intended that this originating process be served upon ... the first defendant Standard Bank Asia Pty Ltd outside Australia, at its registered office being 36th Floor, 2 Pacific Place 88 Queens Way Hong Kong ... The proceedings are founded upon a cause of action arising in New South Wales upon an order made by this Court made on 10 December when in proceedings 2010/249314 that Mustang Marine Australia (Services) Pty Ltd (in liquidation) ACN 129 124 223 be wound up. 3That note appears sufficiently to comply with the requirements of the UCPR r 11.3(1), which merely requires that if an originating process is intended to be served on a defendant outside Australia a notice to that effect must be included in the originating process. However, such a notice does little to inform a defendant served outside Australia of its rights whereas the notice in former Form 13A under Pt 10 r 2A of the former rules was much more explicit in this behalf. It seems to me that, at least in this respect, the drive for simplification of the rules and forms has led to the omission of important material, and I propose to refer this to the Rules Committee for attention. 4Service at the registered office in Hong Kong was in accordance with the laws of Hong Kong and thus sufficient service under UCPR r 11.2. 5The first defendant did not enter an appearance within the time limited for doing so or at all. The plaintiff, by interlocutory process filed on 7 December 2012, applied for leave to proceed, which was granted by a Registrar on 13 December 2012. Having been notified of that order, the first defendant by interlocutory process filed on 1 February 2013 seeks an order setting aside service of the originating process and, alternatively, an order discharging the order made by the Registrar granting leave to proceed, and a declaration that the Court has no jurisdiction over the first defendant. No point is taken that the first defendant's application was not made within the time limited by the rules, and for good reason. Accordingly, the issue is whether service ex juris was authorised by one or more of the categories described in UCPR Schedule 6. The plaintiff invoked three of those categories, namely, those described in sub-paragraphs (a), (e) and (i). 6I deal first with category (a), which is "if the proceedings are founded on a cause of action arising in New South Wales". 7Mustang is registered in Victoria. However, that is not to say its place of incorporation is Victoria. Under the Corporations Act nowadays incorporation is a national concept, and the place of incorporation is not a state but Australia. Accordingly, the place of incorporation is Australia. Mustang's primary place of business appears at all relevant times to have been located in Queensland. When voluntary administrators were appointed in about mid 2010, they were located in New South Wales and the registered office, which until then had been located in Queensland, was moved to New South Wales. The winding up order was made in this Court in New South Wales, and the place of administration of the liquidation is New South Wales. 8The cause of action on which the plaintiffs sue is that created by Corporations Act, s 588M, which provides that: (1) This section applies where: (a) a person (in this section called the director) has contravened sub-section 588G(2) or (3) in relation to the incurring of a debt by a company; and (b) the person (in this section called the creditor) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency; and (c) the debt was wholly or partly unsecured when the loss or damage was suffered; and (d) the company is being wound up; ... (2) The company's liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage. (3) The creditor may, as provided in Subdivision B but not otherwise, recover from the director, as a debt due to the creditor, an amount equal to the amount of the loss or damage. 9It is true that s 588G imposes on a director of a company at a time when the company incurs a debt and if the company is at that time insolvent a duty to prevent the company from incurring the debt. Section 588G provides that such a contravention is also an offence, and s 588J provides means by which compensation can be recovered other than by a liquidator. Nonetheless, it seems to me that the cause of action under s 588M is different, in the sense that it is contingent on the company being wound up (see s 588M(1)(d)), and it is a cause of action that the liquidator has (see s 588M(2)) although in some circumstances a creditor may sue for such compensation (see s 588M(3)). 10Uninstructed by authority, I would have concluded that a cause of action arose once it became complete (cf Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539) and that this cause of action became complete when and only when a winding up order was made and a liquidator appointed, which events took place in New South Wales. However, authority does not permit so simple a conclusion. It is apparently well established by authority that, for the purpose of provisions equivalent to sub-paragraph (a) of Schedule 6, the cause of action arises where in substance the act giving rise to the plaintiff's complaint took place. 11The cases were summarised in a context not far removed from the present by Barrett J, as his Honour then was, in New Cap Reinsurance Corporation v Renaissance Reinsurance Limited [2002] NSWSC 856. That was a case concerning proceedings under s 588FF attacking voidable transactions. On the question of where in substance the cause of action arose, his Honour said: 16. I turn now to the process of assigning a cause of action to a territorial location. One context in which the question of the location of a cause of action arises is determination of the jurisdictional limits of inferior courts. The rule adopted there was stated as follows by Brett J in Cooke v Gill (1873) LR 8 CP 107: Beyond question the Mayor's Court is a court of inferior jurisdiction. ... That being so, independently of the Act, every material fact must have arisen within the jurisdiction to entitle the Mayor's Court to entertain the suit. 'Cause of action' has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed, - every fact which the defendant would have a right to traverse. 17. In the present context involving questions of service of process of a superior court the jurisdiction of which is founded on service without reference to geography, a less comprehensive rule has developed. Jackson v Spittall (1870) LR 5 CP 542 was decided three years before Cooke v Gill by five judges of the Court of Common Pleas, including the three who were to hear Cooke v Gill. The application there was an application under s 18 of the Common Law Procedure Act 1852 to set aside a writ of summons on the ground that the cause of action in proceedings for breach of contract with elements in both England and the Isle of Man did not arise within the jurisdiction of the Court of Common Pleas. Brett J, delivering the judgment of the court, said: If the section were expanded, it would read thus:- 'That there is a cause of action which arose within the jurisdiction, or a cause of action in respect of the breach of a contract made within the jurisdiction'. In the second collocation, the phrase, 'cause of action' clearly does not mean the whole cause of action, as contended for on behalf of the defendant. It means the breach of contract, which breach occurs out of the jurisdiction. But, if the phrase 'a cause of action', when applied to the second subsidiary phrase, does not mean the whole cause of action in the sense contended for, can it be properly said to have that sense when applied to the first subsidiary phrase? Can the same phrase have two different meanings? Is not the natural reading rather this, that it means the same thing when applied to both? It is that which in popular meaning, - for many purposes, in legal meaning, - is 'the cause of action', viz. the act on the part of the defendant which gives the plaintiff his cause of complaint. In the first collocation, that is supposed to occur within the jurisdiction, in the second, without the jurisdiction. 18. The expression "cause of action which arose within the jurisdiction" thus came to acquire a particular and different meaning because of the juxtaposition of two provisions of the Act of 1852. It has retained that meaning in provisions derived from the statute construed in Jackson v Spittall. As is pointed out in Agar v Hyde [(2000) 201 CLR 552], Part 10 rule 10A is such a provision. In Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458, an appeal from the Court of Appeal of this court, the Privy Council regarded Jackson v Spittall as having laid down a rule that, for present purposes: the cause of action arose within the jurisdiction if the act on the part of the defendant, which gives the plaintiff his cause of complaint has occurred within the jurisdiction. 19 In Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, Mason CJ, Deane, Dawson and Gaudron JJ summarised the message from Distillers as follows: The authority of Jackson v Spittall was expressly affirmed in Distillers. In the latter case Lord Pearson said that '[t]he right approach is ... to look back over the series of events ... and ask ... where in substance did this cause of action arise?' ... The approach formulated in Distillers does no more than lay down an approach by which there is to be ascertained, in a commonsense way, that which is required by Jackson v Spittall, namely, the place of 'the act on the part of the defendant which gives the plaintiff his cause of complaint'. That approach has particular point if, as was the case in Distillers, it is necessary to ascribe a place to an omission for the purpose of determining where, if at all, a tort was committed. 12What the authorities referred to by His Honour - in particular Distillers and Voth v Manildra - make clear, is that for present purposes a cause of action does not necessarily arise where it became complete. As Distillers showed, it was not where damage was first suffered, but where a relevant tortious act of the defendant took place, that was important; and that "the right approach is to look back over the series of events and ask where in substance did this cause of action arise". In that inquiry the place where a relevant act or omission of the defendant took place is, at the very least, an important element. 13His Honour then proceeded to apply the principles to the case, which, as I have said, was one of voidable transactions. Rejecting the argument that the complaint against the defendant was that it received a payment from the company (an event which occurred outside New South Wales) his Honour said: 21. That contention involves, to my mind, an altogether too simple characterisation of the cause of action. New Cap, as a company, does not assert any complaint against RRL. Nor, for that matter, does the liquidator. This case cannot be compared, in any meaningful way, with the ordinary case in which A says that B failed in the due discharge of some legal duty owed by B to A or invaded some legal or equitable right of A in such a way as to produce a wrong on the part of B actionable at the suit of A. That is the usual context in which territorial attributes of a cause of action arise for consideration, whether the cause of action be in tort or in contract or founded upon some failure to measure up to some equitable standard or to observe the requirements of a statute. 22. Section 588FF makes a "cause of action" available to the liquidator. It does not provide a means whereby the company in liquidation attacks the other party to a transaction previously entered into by the company. The sole effect of the section is to enable the court to make, on the application of the liquidator, a range of orders against other persons in relation to transactions of the company that are voidable because of s 588FE. A person against whom such an order is made by the court on the application of the liquidator may or may not be a person who was a party to the transaction concerned. This is made clear by s 588FG which precludes an order materially prejudicing a right or interest of a person other than a party to the transaction if certain things are shown. 23. To the extent that it is sensible to regard any "complaint" of the liquidator as underlying a s 588FF application, it is, in concept, a complaint on behalf of the company as an embodiment of its creditors' interests about the conduct of those responsible for the company's pre-liquidation activities. To the extent that there is an attack, it is an attack upon the actions of the former administration. To the extent that an objective needs to be identified, it is the objective of obtaining, with the assistance of the statute, financial resources to be applied in meeting the claims of creditors and, as to any surplus, those of members. The liquidator seeks to remedy depletion, not to defeat receipt of whatever it was that the creditor received by virtue of the transaction in question. The paragraphs of s 588FF(1) under which the liquidator may obtain an order for the payment of money do not contemplate "recovery" in the sense applicable to damages and debts. The court's power is simply a power to direct a person to pay money to the company. 24. Any attack on an undue preference or fraudulent conveyance is always an attack on the giver and the giving, not on the recipient and the receipt. 14The consequence was that, although the disponor (being the company) was not the defendant, the conduct giving rise to the complaint was conduct of the company in New South Wales, namely, making the voidable disposition and, accordingly, the complaint and cause of action were held to arise in New South Wales. 15The position in an insolvent trading case such as the present is somewhat different. It was addressed by Young CJ in Eq, as his Honour then was, in James v Andrews [2001] NSWSC 1149. In essence, his Honour held that the relevant conduct of a defendant that gave rise to the cause of action was the volitional delinquency of the director in omitting to comply with the obligation to prevent the incurring of debts in the relevant circumstances. In the case of a New South Wales corporation in respect of which a New South Wales statute imposed an obligation on a company director, then wherever those obligations might be performed, New South Wales was, at least, one place in which they could have been performed, and a failure to perform them there meant that it could be said that the relevant delinquency occurred at least in part in New South Wales, even if it also occurred elsewhere. 16Turning to the present case, as I have said the company, though "registered" in Victoria, is to be treated as being incorporated in Australia. At relevant times it had its primary place of business in Queensland. It seems to me consistent with the holding of Young CJ in Eq in James v Andrews that, the place of incorporation being in Australia under the laws of Australia, the place for performance of the director's relevant duties was in the place of incorporation - namely, in Australia - and that, within Australia, New South Wales was one of the places in which those duties could have been performed, having regard to the jurisdictional arrangements under the Corporations Act. This is strongly illustrated by the circumstance that when in due course voluntary administrators were appointed they were appointed in New South Wales, and when in due course the company was wound up, it was wound up in New South Wales. It must, therefore, have been possible for directors to take the relevant steps to prevent insolvent trading in New South Wales, and that must have been one of the places in which those obligations could have been performed. 17When that matter is super-added to the circumstance that it was in New South Wales that the winding up order was made, the liquidator appointed and the cause of action completed, it seems to me that it can be said, applying the Voth v Manildra test, that looking at the matter in substance this cause of action arose in New South Wales. On that basis I would find that the ground in sub-paragraph (a) of Schedule 6 is established, the proceedings being founded on a cause of action arising in New South Wales. 18The second ground invoked was that in sub-paragraph (e), namely: If the proceedings, wholly or partly, are founded on, or are for the recovery of damages in respect of, damage suffered in New South Wales caused by a tortious act or omission wherever occurring. 19While it is true that in some contexts it has been held that references to a "tort" in the private international law context extends to include statutory torts [John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503, [21]], I doubt that sub-paragraphs (d) or (e) were intended to capture breaches of statutory obligation that found a claim for compensation. Quite separately, sub-paragraph (r) covers proceedings concerning the construction, effect or enforcement of an Act of New South Wales. Moreover, although there is evidence that some of the company's creditors have addresses in New South Wales, it does not follow that they suffered damage or suffered the relevant damage in New South Wales. I am not satisfied that jurisdiction is made out under sub-paragraph (e). 20I turn then to the ground on which the plaintiff ultimately principally relied, sub-paragraph (i), which is: If the proceedings are properly commenced against a person served or to be served in New South Wales and the person to be served outside New South Wales is properly joined as a party to the proceedings. 21The plaintiff contends that the fourth defendant, Mr Armstrong, was "served or to be served" in New South Wales, and that the first defendant was properly joined to the proceedings against Mr Armstrong. Both of those elements were in issue. 22The address of the fourth defendant shown on the originating process is a Sydney address. That is some slight evidence that he was "to be served" in Sydney. More significantly, a letter from the fourth defendant's solicitor, Mr Armstrong, to the plaintiff's solicitor dated 7 August 2012 states: As you know I act on behalf of Philip Armstrong, Martin Lodge and Russell Watkins. Of those three only Mr Armstrong is a resident of New South Wales, Mr Lodge being a resident of Western Australia and Mr Watkins a resident of Queensland. I am therefore able to accept service of the proceedings on behalf of Mr Armstrong only at this point. I am not able to accept service of the documents enclosed with your letter on behalf of the other two clients as for the purpose of service upon them the material is deficient because it does not comply with the provisions of the Service and Execution of Process Act. If you provide me with proper material on behalf of each of those two gentlemen I will accept service on behalf of them and arrange for the filing of appearances on behalf of each in accordance with the rules. In the meantime you can expect an appearance will be filed on behalf of Mr Armstrong within the next day or so. 23That letter emanated from the Melbourne offices of DLA Piper Australia. The proceedings were apparently served on the fourth defendant by being forwarded to the Melbourne offices of DLA Piper Australia. An appearance was filed on behalf of Mr Armstrong, specifying as his address a Sydney address. Against that, a company extract of Mustang obtained on 31 January 2013 showed that Mr Armstrong's address, presumably at the time of his appointment on 8 August 2009, was in Singapore. 24As to the first limb of this argument, the first defendant submits that Mr Armstrong was, in fact, served in Melbourne by delivery of the process to his solicitors there. Against that, the plaintiff submits that Mr Armstrong was in New South Wales when he was served, albeit that service was effected by delivery to his solicitor in Melbourne. The essential question is whether the provision in Schedule 6 is concerned with where the act of delivery takes place, or with the whereabouts of a defendant at the time that service is effected. In my view it is the latter. In this context, the law is concerned with the distinction between territorial jurisdiction over a defendant and extra-territorial jurisdiction. Sub-paragraph (i) operates so that where there is a defendant over whom the Court has territorial jurisdiction, service ex juris on another defendant who is properly joined to the proceedings is authorised. Personal presence in the jurisdiction at the time of service is the touchstone of territorial jurisdiction. That the determinant is the whereabouts of a defendant, as distinct from the place of which the formal delivery of the process takes place, is illustrated, although not directly analogously to this case, by a number of cases. 25First, Laurie v Carroll (1958) 98 CLR 310 demonstrates, as it were, the other side of the coin. Where a defendant was out of the jurisdiction, service could not be effected on him by substituted service in the jurisdiction. In other words, it was the location of the defendant not the place, where delivery might take place that was crucial. Secondly, if a defendant is outside Australia and waives compliance with the service out of the jurisdiction rules, for example, by entering an unconditional appearance, there has not been service in Australia [John Russell & Company Limited v Cayzer Irvine & Company Limited [1916] 2 AC 298; Amanuel v Alexandros Shipping Co [1986] QB 464; Darrell Lea Chocolate Shops Pty Ltd v Spanish Polish Shipping Co Inc (The Katowice II) (1990) 25 NSWLR 568]. It seems to me that, similarly, if a defendant outside Australia authorised his solicitors in Australia to accept service there would still not be service in Australia, although there might be effective service under the "agreement" provisions of the rules. The corollary, as it seems to me, is that if a defendant is in New South Wales then it is within the territorial jurisdiction of the Court and amenable to it and is served within New South Wales, even if the actual act of delivery of process to the defendant's solicitors on its behalf takes place elsewhere. 26It is then necessary to find as a matter of fact whether it is established that Mr Armstrong was present in New South Wales. I have already summarised the relevant evidence. The Singapore address can, I think, be put to one side in light of the much more recent material provided by the DLA Piper letter and the Notice of Appearance. In particular - although it is hearsay but admissible on an interlocutory application - the very fact that a solicitor acting for three of the defendant s took punctilious steps to insist on compliance with the requirements for service outside New South Wales but in another State in respect of two of them, but conceded the validity of service in respect of Mr Armstrong, is a telling indication that Mr Armstrong was present in New South Wales and amenable to the jurisdiction at the time. 27On the balance of probabilities, I find that Mr Armstrong was present in New South Wales and amenable to the jurisdiction at the time of service. Accordingly, I find that for the purposes of sub-paragraph (i) of Schedule 6, Mr Armstrong was served in New South Wales. 28The second element of this sub-paragraph is the proper joinder of the foreign defendant, namely, the first defendant. Whether a defendant is properly joined for these purposes depends on the authorisation for joinder, which is found in UCPR r 6.19. 29The cause of action against Mr Armstrong is insolvent trading, as I have described. The time frames in respect of which each of Mr Armstrong and the other director defendant s are sued do not precisely coincide nor do they precisely coincide with that in respect of which the first defendant is sued; but they overlap. There are, of course, additional matters to be pleaded and proved against the first defendant to establish that it was a "shadow director", which do not have to be established against the second, third and fourth defendants. Thus, it can be seen that the causes of action against the first defendant are not co-extensive with that against Mr Armstrong. But it is not necessary that they should be. 30Rule 6.19 relevantly provides as follows: (1) Two or more persons may be joined as plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined. (2) Leave under sub-rule (1) may be granted before or after the originating process is filed. 31There is no suggestion that leave was granted before the originating process was filed, so sub-rule (2) can be disregarded. However, joinder is permissible under sub-rule (1) even if a particular defendant is not affected by the whole of the relief sought [Webster v Shaw (1904) 29 VLR 987] so long as some relief is sought against that defendant [Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496, 503]. It is not necessary that each proposed party be involved in all of the transactions, nor that each cause of action involved all of the transactions. This was articulated in Stroud v Lawson [1898] 2 QB 44, 54 - 55 by Vaughan Williams LJ, as follows: I do not think that the rule means that the whole of the transaction must be involved in each of the causes of action joined. I think that, if there was a transaction or series of transactions in respect of which one plaintiff was interested up to a certain point, and other plaintiffs were interested, not only up to that point, but in respect of the entire transaction or series of transactions from beginning to end, under this rule they might join their separate causes of action in one action, because there would be one transaction or series of transactions in respect of which the various plaintiffs all claimed a right to relief. Their remedies or damages might be different, but they would be claiming relief in respect of the same transaction or series of transactions. 32Although I think there was a submission on behalf of the first defendant that there was no Australian authority to that effect, that passage was cited with approval by Mason J, as the later Chief Justice then was, in Payne v Young (1980) 145 CLR 609 (at 618), where his Honour was part of the majority. 33On that basis, I am satisfied that the first defendant was properly joined under r 6.19(1) to the proceedings against Mr Armstrong. It follows that service out of the jurisdiction was authorised by sub-paragraph (i). 34By an interlocutory process filed on 29 January 2013 and amended at the hearing, the sixth defendant sought further and better particulars relevantly of paragraphs 24, and 50 to 54 of the points of claim. 35I agree that paragraph 24, and at least paragraphs 50 and 51, of the points of claim are insufficiently particularised. In my judgment it is an insufficient answer to say, in the circumstances of this case, that the defendants have all the plaintiff's evidence. While it may be that in some cases the case will be sufficiently apparently from evidence served, generally speaking a defendant is entitled to know the case that a plaintiff proposes to make, and not to have to divine it from the evidence served. But for the matter to which I shall come, I would have made an order for further and better particulars. 36However, the application is made, as I have said, by the sixth defendant. The first defendant has not, at this stage at least, submitted to the jurisdiction of the Court and expressly does not wish, at least at this stage, to do so - although that position might or might not change once its challenge to service is disposed of. The only relief sought against the sixth defendant is an order under s 588Y. The only basis for that order is the sixth defendant's knowledge of the plaintiff's insolvency at relevant times. As I observed in the course of argument, that cause of action itself is, to say the least, inadequately and insufficiently pleaded; but that is not presently the subject of a complaint before the Court, nor of a request for further and better particulars by the sixth defendant. 37The sixth defendant has no legitimate interest in the particulars which it seeks, which would not do anything to define, confine or illuminate the case that the plaintiff makes against it. The only available inference is that the sixth defendant is pursuing that information for the benefit of the first defendant which does not wish to submit to the jurisdiction. In that context and in that sense, I regard the application for particulars as an abuse of the process of the Court. I will, therefore, refuse to order particulars on the application of the sixth defendant, although had they been sought by another defendant the position would probably have been different. 38It follows that I find that service ex juris on the first defendant was authorised by sub-paragraphs (a) and (i) of Schedule 6, though not by sub-paragraph (e). 39I decline to set aside service or set aside the order granting leave to proceed. 40I decline to make an order for the particulars sought on the request of the sixth defendant. 41The first defendant's interlocutory process filed on 1 February 2013 is dismissed with costs. 42The sixth defendant's interlocutory process filed 29 January 2013 as amended is dismissed with costs.